AHIP Business Finance Exam 2 Notes (Chapter 7) 2023
The cash flows from owning a share of stock come in the form of... - ANS future dividends. As the owner of shares of common stock in a corporation, you have various ri
...
AHIP Business Finance Exam 2 Notes (Chapter 7) 2023
The cash flows from owning a share of stock come in the form of... - ANS future dividends. As the owner of shares of common stock in a corporation, you have various rights, including:
- ANS the right to vote to elect corporate directors. Voting in corporate elections can be either:
- ANS 1. Cumulative 2. Straight Most voting is done by... - ANS proxy. Proxy battles…
- ANS break out when competing sides try to gain enough votes to have their candidates for the board elected. Someone seeks after a bunch of investors' proxy votes so they can take control of the project In addition to common stock, some corporations have issued…
- ANS preferred stock. Preferred stockholders must…
- ANS be paid first, before common stockholders can receive anything. Preferred stock has a...
- ANS fixed dividend. The two biggest stock markets in the United States
- ANS NYSE NASDAQ Why does the value of a share of stock depend on dividends?
- ANS The value of any investment depends on its cash flows; i.e., what investors will actually receive. The cash flows from a share of stock are the dividends. A substantial percentage of the companies listed on the NYSE and the NASDAQ don't pay dividends, but investors are nonetheless willing to buy shares in them. How is this possible given your answer to the previous question?
- ANS Investors believe the company will eventually start paying dividends (or be sold to another company). Referring to the previous questions, under what circumstances might a company choose not to pay dividends?
- ANS In general, companies that need the cash will often forgo dividends since dividends are a cash expense. Young, growing companies with profitable investment opportunities are one example; another example is a company in financial distress. This question is examined in depth in a later chapter. Under what two assumptions can we use the dividend growth model presented in the chapter to determine the value of a share of stock? Comment on the reasonableness of these assumptions.
- ANS The general method for valuing a share of stock is to
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